To: REW who wrote (20431 ) 3/14/1999 8:32:00 AM From: Jazzbo Read Replies (2) | Respond to of 44908
What differentiates TSIG.com's business model from other e-commerce retailers: Taken from an article in the March 14, 1999 Sunday Times Magazine about Amazon.com, its business plan, growth, future plans, and why and whether investors will continue to support its lofty share price despite inability to turn a profit: "You can offer the greatest selection and service on the Net, but without enormous expenditures for marketing and advertising, no one will come because no one will know you are there. That's why Amazon.com spent approximately $50 million on advertising last year and doled out at least another $50 million to AOL and Yahoo! and MSN to funnel visitors in its direction. On average, on-line retailers spent $26 on marketing and advertising per sale in 1998, while their physical counterparts spent only $2.50. Until [Jeff] Bezos [founder of AMZN] and other internet retailers can find a way to attract and keep customers without such an enormous outlay, they are all going to have a hard time making any money." "...the problem with most Internet business models is that they are attempts to get around the fact that it is not yet clear how to make money from the business." ... "As for Amazon.com's business model, beyond the basic idea of selling books on an ambitious scale over the Internet, there is nothing novel or ingenious." Hopefully obvious, I am not equating our ambitious little start-up company with a hugely recognized behemoth with revenues approaching $1 billion. The comparison lies only in the business models of TSIG.com and most other e-commerce retailers. The primary focus of the Times article is that Amazon.com is "almost entirely a creation of branding" (p.81), is enormously successful at it, and despite huge revenue, is unable to turn a profit. First, TSIG.com is distinguishable from other e-commerce retailers because it is more than just a retailer, it offers outsourced teleservices and internet/web site creation and maintenance: these two divisions alone should make TSIG.com profitable in a period of months. Then, there is TSIG.com's business model. TSIG will pay only minimally for advertising, and primarily, will link its name with other well-known organizations and charities in a costless co-branding effort. At no cost, we ally ourselves with a middleman that will make the effort to spread our name and our products. If the middleman is inept, then it defeats its own purpose of raising revenue for its own cost; therefore, the middleman has every reason to vigorously advocate its cause, and thus, simultaneously advance the branding of TSIG.com. Cost-effective branding is what distinguishes TSIG.com from other e-commerce retailers, and what will, if executed properly, create an anomaly in the Internet world: a profitable e-commerce retailer. TSIG.com has made significant allies, more are alleged to be on the table, Promo-Card deals are said to be in the offing. Will TSIG.com's business model work? I don't know. Some things are certain, though, TSIG must vigorously pursue and advocate its business model, TSIG must execute and follow through, and TSIG must provide unfailing customer service. The Times article makes quite clear that what sets Amazon.com apart from competitors is obsessive customer service; Amazon has no problem bringing customers to its site - by now, a virtual portal - but it knows the customers will not return if they are unsatisfied. Amy Grashel does a wonderful job, but we will need plenty more like her if TSIG intends to satisfy customers. Bad reviews circulate much more quickly than good reviews. Will TSIG.com's business model work? I believe so, but there are few certainties in this world. And now I retire from the computer for the day, the house stirs, and its my lovely bride's 40th (shhh) B-day today, big plans! Regards, Tim